Politically exposed persons: what to do when a client is a PEP

Who counts

The Regulations cover politically exposed persons (PEPs), and their family members and known close associates. Section 5.3 of the CCAB guidance explains who falls within each group.

What the Regulations require

Under regulation 35, if you propose to have or continue a business relationship with a PEP, or a family member or known close associate of a PEP, you must, in addition to enhanced due diligence under regulation 33:

• have approval from senior management for establishing or continuing the relationship;
• take adequate measures to establish the source of wealth and source of funds involved;
• conduct enhanced ongoing monitoring of the relationship.

Domestic PEPs

Since 10 January 2024, regulation 35(3A) says that where a client is a domestic PEP, or a family member or known close associate of one, the starting point is that they present a lower level of risk than a non domestic PEP. If no enhanced risk factors are present, the extent of enhanced due diligence can be lower.

An example

Screening shows that a new client is a local councillor. You record that they are a PEP, consider whether any other risk factors are present, decide what enhanced due diligence is proportionate, get senior management approval, and keep a record of your reasoning.